Major Relief to Developers in Haryana on VAT libaility and Valuation of Goods for impsition of VAT in Works Contract clarified by High Court of Punjab & Haryana in the case of CHD Developers.

Value Added Tax - VAT and CST - By: - Pramod Rai - Dated:- 23-4-2015 - The PandH H.C. has pronounced the judgment in the case of CHD Developers v State of Haryana and Ors. [2015 (4) TMI 784 - PUNJAB AND HARYANA HIGH COURT] wherein challenge was made to the provisions of the HVAT Act and was argued that the Act was imposing VAT on the value of land (VAT on sale of immovable property) as there were no provisions for deduction of the value of land while calculating the taxable turnover. The only de .....

Hon ble Court dealt elaborately with the principles for determination of taxable turnover in case of builders [Para 31]. If proper books maintained: It has been held that Taxable turnover is to be determined as per Actual Books maintained by the developer, and shall be the value of goods incorporated in the execution of works contract. If proper books not maintained: In case the books are not maintained or are not found worthy of credence, it would be permissible for the State Legislature .....

n the goods involved in the execution of a works contract. The said transfer of property in such goods takes place when the goods are incorporated in the works. The value of the goods which can constitute the measures for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works. The activity of construction undertaken by the developer would be works contract only from the stage he enters into a contract with the flat purchaser. Where the agr .....

to charge sales tax on any amount other than the value of goods transferred in course of execution of works contract, the provisions would be ultra vires the Constitution of India. Regarding Deductive method for computation of value of goods In case the Legislature/ Government provides for a deductive method for computation of value on which sales tax is to be paid rather than taking value of materials as the basis, the court held as follows: The 'deductive method' requires all th .....

ith our contention that in case of Builders/ Developers there are several heads of expenditure which have no bearing with transfer of property in goods in execution of works contract, and the same cannot be charged to sales tax. These expenses have been illustratively noted by the Court in Para 32 of the judgment. It is interesting to note clause 13 and 14 of para 32 wherein the petitioners mentioned residuary expenses which are not related to transfer of property in goods, and submitted that t .....